Boston Beer Company, Inc. reports second quarter 2018 net revenue of $273.1 million, an increase of $25.2 million or 10.2%, from the same period last year. Depletions were up 12%
Net income for the second quarter was $23.5 million, or $1.98 a share, a decrease of $5.6 million or 37 cents a share.
The lower profit was attributed primarily to a 27% increase in advertising, promotional and selling expenses.
That 12% jump in 2d quarter depletions was 50% better than the 8% depletions growth in the first quarter. But Jim Koch, chairman/founder, noted that while the company’s total growth “is a testament to our strategy of a diversified brand portfolio, our Samuel Adams volume has continued to decline, despite the early success of our launches of Sam ’76 and Samuel Adams New England IPA. We continue to work hard on our Samuel Adams brand messaging, particularly around Samuel Adams Boston Lager and Seasonals, with the goal of significantly improving these trends and returning Samuel Adams back to growth.
“We were delighted to learn that, for the eighth year out of the last ten years, our distributors ranked us the number one beer supplier in the industry, in the annual poll of beer distributors conducted by Tamarron Consulting, a consulting firm specializing in the alcohol beverage distribution industry,” he added.
Dave Burwick, president/ceo said the depletions growth in the second quarter was a result of increases in Truly Spiked & Sparkling, Twisted Tea and Angry Orchard brands that were only partially offset by decreases in Samuel Adams brand.
“We are excited that Truly Spiked & Sparkling is well positioned as a leader in the emerging segment of hard sparkling water. Twisted Tea also continues to generate consumer pull and grow distribution. We are very pleased by the reaction to our current Angry Orchard campaign and the early success of the Angry Orchard Rosé cider launch, which we believe is attracting new drinkers to the category from wine and spirits. Both Sam’76 and New England IPA show promise, and we will continue to support them aggressively in the second half of the year.
“During the quarter, our operating expenses increased significantly, primarily due to the timing of our planned brand investments. Brand investment increases for the remainder of the year will moderate, as we maintain our annual spend guidance,” Burwick said.
“Based on our first half results, we have increased our expectations for full year depletions growth, reflecting our view of the most recent trends. We will continue to invest in capacity increases and our brewing and packaging capabilities to support our product innovation and brand growth. These improvements include our new can line in our Pennsylvania Brewery that began production this quarter,” he said…
The company has increased its use of third party breweries during the quarter, in response to the accelerated depletions growth. “The growth has been challenging operationally, which has resulted in higher supply chain costs,” Burwick said. “The new can line will help relieve these pressures as it ramps up during the third quarter. Further, based on our rapid growth and to address current capacity bottlenecks, we are accelerating capacity and efficiency improvements at our breweries and accordingly are raising our capital spend expectations for 2018.”